Documents & Reports

Fiscal policy and development strategy in Southern Asia (English)

Abstract

The role of fiscal policy is studied in the context of two distinct development strategies in five countries (Indonesia, Bangladesh, India, Pakistan and Sri Lanka) over a period of 30 years. The study reviews the evidence on the roles of taxation and...
See More +The role of fiscal policy is studied in the context of two distinct development strategies in five countries (Indonesia, Bangladesh, India, Pakistan and Sri Lanka) over a period of 30 years. The study reviews the evidence on the roles of taxation and public expenditure, and of overall fiscal incidence, and the effects of fiscal actions on savings in these countries. Some of the conclusions of the study are as follows. Tax structure and expenditure tended to be similar under the dirigiste and market oriented policy regimes. They differed among countries because of differences in economic structure and history more than differences in strategy. Fiscal policy tended to be less powerful than other economic policies. However, in some cases studied, the potential of fiscal policy in its impact on equity and growth is demonstrated. The tax system seems to have been as progressive under market oriented as under dirigiste regimes. However, pro-poor expenditures were higher under the dirigiste system if only because of the higher proportion of GDP devoted to social and welfare expenditures. Nevertheless, this is to be matched against the relatively higher growth rate of the market oriented regime, which also benefitted the poor.
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